This final report presents the proposed regulatory technical standards to amend the regulation on own funds and eligible liabilities of financial institutions. It suggests reducing the processing time for applications to reduce own funds from four to three months, considering feedback from institutions and the assessment by competent authorities. The standards will be submitted to the European Commission for…
This document is the final report published in 2026 by the European Banking Authority (EBA) concerning the draft regulatory technical standards (RTS) amending Delegated Regulation (EU) No 241/2014. It concerns the application timeline for the prior authorization request to reduce own funds and eligible liabilities instruments, pursuant to Articles 77, 78 and 78a of Regulation (EU) No 575/2013. The scope covers prudential requirements for credit institutions and investment firms within the European Union, focusing on authorization procedures and associated deadlines.
The EBA final report presents an amendment to the regulatory technical standards (RTS) relating to the submission deadline for prior authorization requests to reduce own funds and eligible liabilities. Initially, the deadline was extended from three to four months by Delegated Regulation (EU) 2023/827, to allow a more thorough assessment by competent and resolution authorities. However, following practical monitoring and feedback from institutions, the EBA finds that authorities are now able to process these requests within a shorter timeframe. Consequently, it is proposed to revert to a three-month deadline, thus offering more flexibility to institutions for capital planning while maintaining a sufficient prudential framework. This amendment will be submitted to the European Commission, then to the European Parliament and Council before official publication. Furthermore, adjustments are proposed to remove simplified procedures that have become obsolete following Directive (EU) 2024/1174, notably regarding entities in liquidation. Public consultations gathered a favorable consensus on this deadline shortening, without major changes to requirements or anticipated additional costs. This development aims to harmonize and simplify the management of prior authorization requests within the European Union, while ensuring financial safety.
The document responds to the mandate given to the EBA by Regulation (EU) No 575/2013 (CRR1) to develop regulatory technical standards specifying the prior authorization procedure for the reduction of own funds. The initial amendment of the submission deadline, extended from three to four months by Delegated Regulation (EU) 2023/827, aimed to allow an in-depth evaluation of requests including eligible liabilities, in line with CRR2 developments. However, feedback during the public consultation indicated that this deadline was too long. The EBA therefore monitored practical implementation and found that competent and resolution authorities can now process requests more quickly. The objective is thus to reduce this deadline to three months to improve institutions' flexibility in capital management, while maintaining a robust prudential framework. The scope is limited to deadlines and prior authorization procedures, without a comprehensive revision of other RTS aspects. The amendments also take into account the impacts of Directive (EU) 2024/1174 on entities in liquidation.
1. Regulatory framework and deadline evolution:
- Regulation (EU) No 575/2013 requires prior authorization to reduce own funds and eligible liabilities.
- Initially, the deadline to submit the request was three months before the intended action (Article 31 RTS).
- Delegated Regulation (EU) 2023/827 extended this deadline to four months to better manage the increased complexity of assessments, notably cooperation between competent and resolution authorities (p. 4-5).
2. Feedback and justification for shortening:
- After several years of application, the EBA observed that authorities efficiently process requests within a shorter timeframe.
- The four-month deadline is considered excessive by stakeholders, limiting institutions’ flexibility.
- Returning to a three-month deadline is deemed reasonable and prudent, balancing efficiency and safety (p. 3-5, 7).
3. Proposed technical amendments:
- Reduction of submission deadline for ad hoc and general permissions to three months.
- Limitation of consultation deadline between authorities to a maximum of two months, with one month for communication of the necessary "margin" by the resolution authority.
- Removal of simplified procedures for entities in liquidation, consistent with Directive (EU) 2024/1174 which now exempts them from prior authorization (p. 6-10).
4. Cost-benefit analysis:
- The amendment aims to harmonize practice within the EU, avoiding case-by-case derogations.
- Authorities should implement these changes without additional costs or burdens.
- Institutions benefit from greater flexibility for planning their capital reduction operations (p. 11-13).
5. Public consultation and feedback:
- Three responses received, all favorable to the deadline shortening.
- Suggestions for further simplifications (exemptions, proportionate procedures, request content) were noted but remain outside the scope of this targeted amendment.
- The EBA maintains its monitoring of implementation to assess possible future developments (p. 13-16).
Established facts:
- The four-month deadline for submitting prior authorization requests was deemed too long by the concerned actors (p. 4, 13).
- Competent and resolution authorities have acquired the necessary experience to process these requests within three months (p. 5, 7).
- Directive (EU) 2024/1174 modifies requirements for entities in liquidation, rendering the simplified procedure provided in the RTS obsolete (p. 5, 7).
Assumptions:
- The three-month deadline is sufficient to ensure a prudent and complete evaluation of requests.
- Cooperation between authorities can be effectively carried out within reduced deadlines (p. 7).
Interpretations:
- Returning to a shorter deadline improves institutions’ flexibility without compromising financial safety.
- The proposed amendments are targeted and do not call into question the prudential objectives of the RTS (p. 3, 11).
Uncertainties:
- Feedback suggests that an even greater reduction of the deadline could be desirable, but this is not retained at this stage.
- Other simplifications or procedural adaptations could be considered in a broader future revision (p. 15).
The EBA recommends amending Delegated Regulation (EU) No 241/2014 to reduce the submission deadline for prior authorization requests to reduce own funds and eligible liabilities from four to three months. This measure is justified by authorities’ acquired experience and stakeholder feedback, offering a better balance between prudential rigor and operational flexibility. Furthermore, it is proposed to remove references to simplified procedures for entities in liquidation, in accordance with Directive (EU) 2024/1174. The RTS draft will be submitted to the European Commission, then to Parliament and Council for adoption and publication. The EBA commits to continue monitoring implementation and to consider further improvements within the framework of a possible comprehensive RTS revision.
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